Question

. The trial balance of Ozmet Industries contained the following accounts at June 30, the end of the company’s fiscal year:

Debit                            Credit

Cash                                                                                                                                  $ 6,800

Accounts Receivable                                                                                                   49,800

Inventory                                                                                                                        56,950

Supplies                                                                                                                              5,600

Equipment                                                                                                                      62,000

Accumulated Depreciation—Equipment                                                                                                   $ 20,000

Notes Payable                                                                                                                                                            41,000

Accounts Payable                                                                                                                                                     32,500

Common Stock                                                                                                                                                           1,000

Retained Earnings                                                                                                                                                   61,700

Sales Revenue                                                                                                                                                        506,800

Sales Returns and Allowances                                                                                    13,000

Cost of Goods Sold                                                                                                      246,900

Salaries and Wages Expense                                                                                    125,650

Advertising Expense                                                                                                      36,000

Utilities Expenses                                                                                                              6,890

Maintenance and Repairs Expense                                                                             9,810

Freight-out                                                                                                                         16,800

Rent Expense                                                                                                                    26,800                        ­­________

$663,000                       $663,000

Adjustment data:

1. Supplies on hand totaled $2,200.

2. Depreciation is $6,800 on the equipment. (Selling expense)

3. Interest of $3,800 is accrued on notes payable at June 30.

Other data:

1. Salaries and wages expense is 60% selling and 40% administrative.

2. Rent expense and utilities expense are 70% selling and 30% administrative.

3. $10,000 of notes payable are due for payment next year.

4. Maintenance and repairs expense is 100% administrative.

Required:

(a) Journalize the adjusting entries.

(b) Prepare an adjusted trial balance.

(c) Prepare a multiple-step income statement and retained earnings statement for the year and a classified balance sheet as of June 30, 2020.

(d) Journalize the closing entries.

(e) Prepare a post-closing trial balance

Answer 1

Solution:

Debit Credit Requirement (a) Adjusting Journal Entries Transaction Accounts Title 1) Supplies Expense Supplies (To record Supplies consumed) $3,400 $3,400 2) $6,800 Depreciation Expense Accumulated Depreciation-Equipment (To record depreciation expense) $6,800 3) $3,800 Interest Expense Interest Payable (To record Interest due on notes) $3,800

Requirement (b) Ozmet Industries Adjusted Trial Balance June 30, 2020 Accounts Title Debit Credit Cash $6,800 $49,800 $56,950 $2,200 $62,000 $26,800 $41,000 $32,500 $3,800 $1,000 $61,700 $5,06,800 Accounts Receivable Inventory Supplies Equipment Accumulated Depreciation - Equipment Notes Payable Accounts Payable Interest Payable Common Stock Retained Earnings Sales Revenue Sales Returns and Allowances Cost of Goods Sold Salaries and Wages Expense Advertising Expense Utilities Expenses Maintenance and Repairs Expense Freight-Out Rent Expense Supplies Expense Interest Expense Depreciation Expense Total $13,000 $2,46,900 $1,25,650 $36,000 $6,890 $9,810 $16,800 $26,800 $3,400 $3,800 $6,800 $6,73,600 $6,73,600

$4,93,800 $2,46,900 $2,46,900 Requirement (c) Ozmet Industries Income Statement For the Year Ended June 30, 2020 Sales Revenue $5,06,800 Less: Sales Returns and Allowances $13,000 Net Sales Revenue Cost of Goods Sold Gross Profit Operating Expenses: Selling Expenses Salaries and Wages Expense $75,390 Advertising Expense $36,000 Utilities Expense $4,823 Freight-out $16,800 Rent Expense $18,760 Depreciation Expense $6,800 Total Selling Expense Administrative Expenses Salaries and Wages Expense $50,260 Utilities Expense $2,067 Maintenance and Repairs Expense $9,810 Rent Expense $8,040 Supplies Expense $3,400 Total Administrative Expense Operating Income Other Expenses and Losses: Interest Expense Net Income $1,58,573 $73,577 $14,750 $3,800 $10,950

Ozmet Industries Statement of Retained Earnings For the Year Ended June 30, 2020 Beginning Balance of Retained Earnings Add: Net Income Ending Balance of Retained Earnings $61,700 $10,950 $72,650 Ozmet Industries Balance Sheet June 30, 2020 Assets Current Assets: Cash Accounts Receivable Inventory Supplies Property, Plant & Equipment: Equipment Less: Accumulated Depreciation $6,800 $49,800 $56,950 $2,200 $62,000 $26,800 $35,200 Total Assets $1,50,950 Liabilities and Stockholders' Equity Liabilities: Current Liabilities: Accounts Payable Notes Payable (Current Portion) Interest Payable Long-Term Liabilities: Notes Payable $32,500 $10,000 $3,800 $46,300 $31,000 Stockholders' Equity: Common Stock Retained Earnings $1,000 $72,650 $73,650 Total Liabilities and Stockholders' Equity $1,50,950

Credit Requirement (d) Closing Journal Entries Transaction Accounts Title 1) Sales Revenue Income Summary (Record the entry to close revenue) Debit $5,06,800 $5,06,800 2) 2) $4,95,850 Income Summary Sales Returns and Allowances Cost of Goods Sold Salaries and Wages Expense Advertising Expense Utilities Expenses Maintenance and Repairs Expense Freight-Out Rent Expense Supplies Expense Interest Expense Depreciation Expense (Record the entry to close expense) $13,000 $2,46,900 $1,25,650 $36,000 $6,890 $9,810 $16,800 $26,800 $3,400 $3,800 $6,800 3) $10,950 Income Summary Retained Earnings (Record the entry to close income) $10,950

Credit Requirement (e) Ozmet Industries Post-Closing Trial Balance June 30, 2020 Accounts Title Cash Accounts Receivable Inventory Supplies Equipment Accumulated Depreciation - Equipment Notes Payable Accounts Payable Interest Payable Common Stock Retained Earnings Total Debit $6,800 $49,800 $56,950 $2,200 $62,000 $26,800 $41,000 $32,500 $3,800 $1,000 $72,650 $1,77,750 $1,77,750